Caps are used on adjustable rate mortgages (ARMs) to limit the interest rate and/or the payment. Most ARMs have a periodic cap that is around 2% per year and a life cap of around 5%-6% over the life of the loan. Payment only caps sometimes create negative amortization where the principal balance of the loan increases rather than decreases over time.

Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There can be non-recurring cost that include points, appraisal fees, etc. that are a one time charge or recurring cost such as taxes and insurance that incur while the new buyer/borrower owns the real estate.

Fee paid for a broker or other entity for services rendered. Real estate brokers and mortgage brokers receive a commission for the services they provide; a real estate broker secures a buyer for a property that is for sale and a mortgage broker secure a mortgage loan for the buyer to finance the purchase of a property. Commissions are generally paid as a percentage of the sales price in a real estate transaction or the loan amount in mortgage transaction.

A mortgage loan that is not guaranteed or insured by the government. FHA and VA loans are not conventional loans. Convertible ARMs: ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.

A provision in some ARMs that allows you to change the ARM to a fixed-rate loan at some point during the term. Usually the conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed rate is generally set at one of the rate then prevailing for fixed-rate mortgages. The conversion feature may be available at extra cost.

Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other cost, minus any depreciation claimed on tax returns over the years.